GERN- After huge news Thursday of ADCOM support, the stock
can be more easily valued. I mean, no doubt GERN will be burning through tons of cash, as without a partner, they will have to go it on their own, So what I feel is important at this point, is to see how much GERN would make if they do go it on their own. As I stated in the past, when it comes to any company with a product(in this case a drug) with huge potential, but that isn't making money yet, is to dig into what profit margins would be for their product. The biggest question of course is, how much in revenues is the potential.
In GERNs case, their drug Imetelstat has to be compared with other infusion drugs. When I was in the biotech Horizon Pharma, their infusion drug Tepezza had 82% margins. Lets assume that GERNs Imetelstat has 80% margins. My guess is. after looking at 10Q Income Statement, that GERN would make around $1 in eps, with the first $1B in revenues. Since their only competition, Bristol Myers drug Reblozyl is expected to do $2B/year by 2028, that GERN can in fact get to $1B/year revenues for their infusion drug, then what would the stock be worth. I would have to say, around $12-$15, but of course that would depend on growth. Horizon had around a 15-17 PE going forward, after they added Tepezza to their pipeline.
The bottom line with trying gauge future revenues and eps for any drug, is to get some sort of idea of what the stock could be worth, IF everything went great. Now since, nothing seems to go as planned, and costs are almost always higher than anticipated, I would give GERN a current price target of $7-$10, and say this is a one year price target, assuming FDA approval(which now has a 97% chance according to JAMA stats).
